Investment Professionals

Global biotechnology in your clients’ portfolios

Biotechnology has hit the headlines during the COVID-19 pandemic as companies race for vaccines and treatments, but its growth prospects extend beyond this period.

Australian investors may be well familiar with this industry, given the dominance of CSL, but may be missing exposure to the international market, in particular, the US, the global centre of biotechnology.

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What is biotechnology?

Biotechnology is a sub-industry of the healthcare sector and specifically refers to technologies that use biological processes, capturing companies that focus on research, development, manufacturing and/or marketing of products based on biological and genetic information. The different types of biotechnology include biological drugs, vaccines, immunotherapy, gene therapy, orphan drugs and genetic engineering.

The US is typically viewed as the centre of global biotechnology due to the size of its market and the world-renowned US Food & Drug Association (FDA) approval process. The US industry is valued at US$113.bn, approximately 14.2x the size of the Australian biotechnology industry[1].

Why use global biotechnology in your clients’ portfolios?

  1. A growth investment

    a. Biotechnology is predicted to be valued at more than US$729bn by 2025, compared to US$295bn today[2].

    b. The industry will benefit from increased spending in healthcare. The US, for example, is expected to average 5.4% annual increases in national health spending through to 2028[3].

  2. Diversification away from concentrated Australian industry

    a. Biotechnology can be a high-risk industry, as well as lucrative. Average development costs for developing a drug are estimated at more than US$2.1bn and processes can take 10 years or more for approvals – assuming the drugs are successful[4][5].

  3. Biotechnology performance has also benefited from highly active mergers and acquisitions (M&A) activity, expected to continue in the future.

a. M&A for biotechnology was valued at US$23bn in 2019 with predictions of increased activity for 2020[6].

How to invest in biotechnology?

You can consider direct shares or managed options for your clients’ portfolios. Direct shares may be a riskier option due to the high failure rates of drug testing and long periods of development. Managed options such as ETFS S&P Biotech ETF (ASX code: CURE) may offer broader exposure across a number of companies.

For more information about investing in biotechnology, click here or contact us using the details below.

Investor Relations

Institutional Trades

Phone +61 2 8311 3488

Email: infoAU@etfsecurities.com.au

Phone +61 2 8311 3483

Email: capitalmarkets@etfsecurities.com.au

[1] https://www.ibisworld.com/au/industry/biotechnology/1901/

[2] https://www.gminsights.com/industry-analysis/biotechnology-market

[3] https://www.healthleadersmedia.com/finance/national-health-spending-growth-projected-54-annually-through-2028

[4] Deloitte Centre for Health Solutions, Unlocking R&D Productivity, 2018.

[5] https://www.phrma.org/en/Advocacy/Research-Development/Clinical-Trials

[6] https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/life-sciences/life-sciences-pdfs/ey-firepower-report-2020-how-will-deals-done-now-deliver-what-the-health-ecosystem-needs-next-v2.pdf